AMR, US Airways Said Near Merger Deal as Boards to Vote

A US Airways Group Inc. aircraft, back, taxis after landing behind an aircraft of AMR Corp.'s American Airlines, at Reagan National Airport in Washington, D.C. Photographer: Andrew Harrer/Bloomberg

Feb. 9 (Bloomberg) -- The boards of American Airlines
parent AMR Corp. and US Airways Group Inc. are prepared to vote
on a merger on Feb. 11 as executives and advisers work on final
terms this weekend, people familiar with the matter said.

The sides have agreed that AMR’s bankruptcy creditors would
get 72 percent of the equity in the new carrier, with 28 percent
for US Airways shareholders, said two of the people, who asked
not to be identified because the talks are private. US Airways
Chief Executive Officer Doug Parker will run the airline as AMR
CEO Tom Horton becomes non-executive chairman, the person said.

Horton’s tenure in that post is still being negotiated, and
will be limited to one or two years, one of the people said.
AMR’s bankruptcy creditors committee is poised for a vote early
next week on any merger accord, with an announcement as soon as
Feb. 12, two people said.

Leadership and the division of the equity had been the
final major issues in the discussions, people familiar with the
talks have said. A tie-up between American, the third-largest
U.S. airline, and No. 5 US Airways would create the world’s
biggest carrier by passenger traffic.

American declined to comment on the deliberations, said
Mike Trevino, a spokesman for the Fort Worth, Texas-based
carrier. Kelly Sullivan, a US Airways spokeswoman who works for
public-relations firm Joele Frank, Wilkinson Brimmer Katcher,
also declined to comment.

Jack Butler, an attorney for the creditors committee,
didn’t respond to an e-mail or phone call seeking comment.

New Stock

Besides the split of equity between AMR creditors and US
Airways investors, the proposed merger calls for existing AMR
stockholders to get shares in the combined company, two of the
people said. Details of that plan are still being negotiated,
one person said.

AMR’s $460 million of 6.25 percent convertible notes due in
October 2014 have soared more than fivefold since the company
filed for bankruptcy on Nov. 29, 2011. They rose 2.1 percent to
97.5 cents on the dollar yesterday, according to Trace, the
bond-price reporting system of the Financial Industry Regulatory
Authority.

US Airways fell 2.4 percent to $14.75 at yesterday’s close
in New York. The shares have more than tripled since the day
before AMR’s bankruptcy filing.

Reuters reported on Feb. 8 on the timing of the airlines’
board meetings and possible announcement.

Merger Benefits

A merged airline would realize at least $1.2 billion a year
in savings and new revenue, according to Tempe, Arizona-based US
Airways, which has said it would keep the American name in a
merger and its Fort Worth headquarters. It began pursuing
American in January 2012.

A group of AMR bondholders with about $1.5 billion in
unsecured debt said last month it was backing a merger and
pushing for an agreement by mid-February. The bondholders
concluded after reviewing confidential data that a merger would
provide more cost savings and other financial benefits than a
stand-alone American, one person said.

US Airways’ pilots union said yesterday that members
ratified interim contract terms if a merger occurs. The accord,
approved with 75 percent of the vote, would bring US Airways’
pilot pay up to that at American and includes $1.6 billion in
“economic improvements” over six years, said Gary Hummel,
president of the US Airline Pilots Association.

The agreement was approved earlier by leaders at American’s
Allied Pilots Association.

The case is in re AMR Corp., 11-15463, U.S. Bankruptcy
Court, Southern District of New York (Manhattan).